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Responding to the Downturn: How Does Information Change Behavior?

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  • Norma B. Coe
  • Kelly Haverstick

Abstract

Many workers nearing retirement experienced a dra­matic decrease in their retirement assets due to the stock market downturn. In order to maintain their expected standard of living in retirement, workers will need to work longer, save more, or do both. To mea­sure the response of older workers to this downturn, the Center for Retirement Research at Boston College (CRR) fielded the CRR 2009 Retirement Survey on a nationally representative sample of 45-59-year-old labor force participants with relatively high pre-down­turn assets.1 This brief is the third of four based on the CRR 2009 Retirement Survey. The first brief described the Survey and highlighted its unique financial, employment, and behavioral factors.2 The second brief explored the relationship between these factors and worker responses to the downturn.3 This brief examines how providing simple information about the trade-offs involved in responding to the downturn impacts the responses. This brief is organized as follows. The first section provides a brief overview of the initial responses – work more, save more, both, or neither. The second section describes how these responses changed once the trade-off between working longer, saving more, and consuming less in retirement was made explicit. The third section then explains the relationship be­tween the initial responses and the more informed re­sponses. The fourth section identifies the character­istics associated with respondents who changed their response. The final section concludes that providing simple information on trade-offs appears to have a surprisingly large impact on changing responses.

Suggested Citation

  • Norma B. Coe & Kelly Haverstick, 2010. "Responding to the Downturn: How Does Information Change Behavior?," Issues in Brief ib2010-20, Center for Retirement Research, revised Dec 2010.
  • Handle: RePEc:crr:issbrf:ib2010-20
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    File URL: http://crr.bc.edu/briefs/responding-to-the-downturn-how-does-information-change-behavior/
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    References listed on IDEAS

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    1. Jonathan S. Skinner, 1996. "Is Housing Wealth a Sideshow?," NBER Chapters,in: Advances in the Economics of Aging, pages 241-272 National Bureau of Economic Research, Inc.
    2. Alicia H. Munnell & Mauricio Soto, 2008. "The Housing Bubble and Retirement Security," Issues in Brief ib2008-8-12, Center for Retirement Research, revised Aug 2008.
    3. Todd Sinai & Nicholas S. Souleles, 2007. "Net worth and housing equity in retirement," Working Papers 07-33, Federal Reserve Bank of Philadelphia.
    4. Todd Sinai & Nicholas S. Souleles, 2005. "Owner-Occupied Housing as a Hedge Against Rent Risk," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 763-789.
    5. Christopher D. Carroll & Misuzu Otsuka & Jirka Slacalek, 2006. "How Large Is the Housing Wealth Effect? A New Approach," NBER Working Papers 12746, National Bureau of Economic Research, Inc.
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    7. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
    8. Alan Greenspan & James Kennedy, 2008. "Sources and uses of equity extracted from homes," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 120-144, spring.
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    10. repec:crr:issbrf:ib2006-43 is not listed on IDEAS
    11. Alicia H. Munnell & Mauricio Soto, 2006. "What Replacement Rates Do Households Actually Experience In Retirement?," Working Papers, Center for Retirement Research at Boston College wp2005-10, Center for Retirement Research.
    12. Engelhardt, Gary V., 1996. "House prices and home owner saving behavior," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 313-336, June.
    13. Cox, Donald & Jappelli, Tullio, 1993. "The Effect of Borrowing Constraints on Consumer Liabilities," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 197-213, May.
    14. Morris A. Davis & Michael G. Palumbo, 2001. "A primer on the economics and time series econometrics of wealth effects," Finance and Economics Discussion Series 2001-09, Board of Governors of the Federal Reserve System (U.S.).
    15. Munnell, Alicia H. & Geoffrey M. B. Tootell & Lynn E. Browne & James McEneaney, 1996. "Mortgage Lending in Boston: Interpreting HMDA Data," American Economic Review, American Economic Association, vol. 86(1), pages 25-53, March.
    16. Glenn B. Canner & Karen E. Dynan & Wayne Passmore, 2002. "Mortgage refinancing in 2001 and early 2002," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Dec, pages 469-481.
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